EU sanctions threaten possible ceasefire in the Black Sea

The US government needs European approval to ease some sanctions against Russia—a prerequisite for the new ceasefire in the Black Sea. But this could prove complicated.

Brussels – As part of the deal brokered by the Trump administration this week, Russia and Ukraine agreed to a ceasefire in the Black Sea. However, Moscow made clear that its participation was subject to several preconditions, including the easing of Western sanctions.

According to a statement from the Kremlin, the agreement provides for the lifting of certain sanctions, particularly in the banking sector and agriculture – such as the export of fertilizers.

As the Wall Street Journal reported, Washington appears to agree in principle. The Ukrainian government in Kyiv, however, emphasized that it has not agreed to any concessions for Moscow.

Russia's double game

The exclusion of Russian banks from the international payment system SWIFT is one of the first measures imposed by EU member states after the start of the Russian invasion of Ukraine.

Currently, eight Russian banks are affected – with the exception of Gazprombank, which was deliberately left out to allow EU countries to continue making payments for Russian gas and oil deliveries. However, this exception is limited by US sanctions.

The Kremlin is linking its participation in the ceasefire in the Black Sea, among other things, to the reconnection of the Russian agricultural bank Rosselkhozbank and other institutions to the SWIFT system.

Rosselkhozbank is considered a key source of financing for Russia's food production and exports, but has been placed on the sanctions list because of its role in supporting the Russian war apparatus.

At the same time, however, the Russian demand is misleading because when the EU imposed economic sanctions against Russia in February 2022, food products were explicitly excluded .

In other words, Russia remains able to trade grain and fertilizers on the world market – and continues to do so.

Even if the Trump administration appears willing to ease sanctions as part of the deal, this requires the approval of the EU – and that is not in sight.

“An end to Russia’s unprovoked and unjustified aggression in Ukraine and the unconditional withdrawal of all Russian armed forces from the entire territory of Ukraine would be key prerequisites for amending or lifting the sanctions,” a spokesperson for the EU Commission emphasized.

In Brussels, Russia's actions in connection with the grain agreement are seen as an attempt to weaken the EU sanctions architecture.

Kyiv and its European partners fear that even small concessions could gradually undermine existing sanctions mechanisms. Furthermore, Moscow could attempt to drive a wedge between the US and Europe over sanctions policy .

Since SWIFT is headquartered in Belgium, the system is subject to European law. "At some point, we Europeans must be included in the discussions," an EU diplomat told Euractiv.

“SWIFT cannot reconnect Russian banks until the EU changes its sanctions laws,” explained Janis Kluge, Russia expert at the German Institute for International and Security Affairs.

SWIFT did not comment on the matter.

EU sanctions against Russia must be renewed unanimously by the 27 member states every six months. The next deadline is July 31.

Diplomats stress that the EU is not considering lifting sanctions before a complete ceasefire and the withdrawal of Russian troops from Ukraine.

"Everyone is analyzing what this could mean. But so far, this is an agreement we have not been involved in," another EU diplomat told Euractiv.

“Nothing will change until the sanctions are extended [in July] – and we will not work on changes because Russia itself has not changed, nor have its goals,” the diplomat continued.

Hungary and US pressure

Several EU member states are expressing concern about Hungary. Budapest was one of the first countries to react to the Black Sea Agreement and demand an end to the sanctions. Hungary has repeatedly used its consent to the sanctions extension as a means of political pressure .

“Theoretically, an EU state could threaten to block the extension of sanctions if the SWIFT exclusion of Russian banks is not lifted,” Kluge explained.

Trump's return to the White House in January further encouraged the Hungarian government to disrupt the regular sanctions process. Trump could exploit the resulting chaos for his own purposes.

The EU Commission did not comment on whether US representatives have already made contact on this issue.

According to analysts, there is a theoretical workaround for the US: Washington could reopen correspondent banks for Russian institutions under US jurisdiction.

"That would mean I can trade in dollars, conduct dollar transactions, do everything with US dollars—even without SWIFT. It would be extremely cumbersome, tedious, and slow, but doable," Kolyandr explained.

However, analysts agree that Washington cannot force SWIFT to reconnect Russian banks.

“Trump could try to put pressure on SWIFT, which would make their work considerably more difficult – but he can’t do anything against EU law,” Kluge said.

Asked what reaction Washington could expect if it tried to pressure Europe to ease sanctions quickly, a third diplomat replied: "I can't imagine that happening—at least not if you're in your right mind."

[EPD/CN]